Did Pets.com wrongfully kill Sock Puppet?
November 13, 2000 12:00 AM PT
by Ali Asadullah

The defendant: Pets.com (IPET)

The charge:

  Wrongful death of Sock Puppet, the Pets.com mascot

The prosecution: Ladies and gentlemen, a life has been taken. Although all life is precious, the loss of this individual is particularly devastating given the impact he had on so many lives. I am of course speaking of our beloved Sock Puppet, the mascot for the now defunct online pet supplier Pets.com. Yes, my friends, on Thursday, February 9, 2000, at approximately 11:00 a.m. PT, Pets.com executives euthanized Sock Puppet as if he were nothing more than a common street mutt.

But Sock Puppet was not an old, sick dog that needed to be put out of its misery; he was in the prime of his life! No, this was a wrongful death by the management of Pets.com. They ran the company dry and then expediently put the poor dog to sleep.

The executives' negligence is undeniable. In the quarter ending in October, Pets.com took in $9.4 million in revenue and spent $9.6 million on goods and $14.7 million on marketing. You can't care properly for a mascot when you're losing 68 cents per share and not minding the war chest.

Now the defense will argue that Pets.com did its best to find a new home for Sock Puppet and that Sock Puppet's passing is the fault of Pets.com's prospective investors who chose not to throw more money at the company. But ladies and gentlemen, how could one expect to garner financial support for a company that last year was selling goods for half what it paid for them, that paid $10.6 million in stock in June to swallow hard-to-digest assets of rival Petstore.com and that failed to keep its stock from plummeting to single digits after less than a year of public trading?

Not even backing from Amazon.com (AMZN) and Disney's (DIS) Go.com (GO), nor a cost-cutting move of operations to Indiana could make this company a fit owner for such a fine mascot.

The moral of this story: You shouldn't own a pet if you can't take care of it.

The defense: Ladies and gentlemen of the jury, the prosecution has accused my client of being maliciously expedient in choosing to shutter Pets.com and thereby sign the death warrant for Sock Puppet. But the only expedience I see is on the part of those eager to find a scapegoat for this unfortunate turn of events.

Not but a year ago, all signs pointed to a long and happy life for Pets.com and Sock Puppet, too. Although competition was stiff with rivals such as Petsmart.com and Petco.com, it was reasonable to think that a sizable portion of the $23 billion spent on pets in the U.S. could be siphoned off by Pets.com. And indeed in the last full quarter of the company's operations, revenues continued to rise, cost of operations continued to decline and gross margins improved. Sounds like a recipe for success.

Unfortunately, Pets.com and Sock Puppet were victims of a skittish stock market and an overly discriminating venture community. It is beyond comprehension that 50 prospective investors could all balk at the strength of the brand Sock Puppet had built for the company. In a market where differentiation was the key to success, Sock Puppet had gained Pets.com a leg up in that category. Yet only eight potential investors even bothered to visit the company. If anything, it is the VCs' sudden, unexplained lack of interest that should be blamed for Sock Puppet's demise.

Ladies and gentlemen, even the best of the best, such as eBay (EBAY), have resorted to downsizing. With shortsighted investors ignoring the opportunity at Pets.com, Sock Puppet was doomed. It was an unfortunate death, but one that was out of the company's control.

Guilty or not guilty?